Main US indexes rally; Nasdaq out front, up ~0.6%
Energy leads S&P 500 sector gainers; Utilities weakest group
Euro STOXX 600 index off ~0.3%
Dollar down; gold, bitcoin both up ~2%; crude up ~2.5%
US 10-year Treasury yield edges up to ~4.16%
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BANKS EYE HISTORIC HAT-TRICK AS BOFA PREDICTS 2026 RALLY
Bank of America is betting big on U.S. banks as they enter 2026, calling for a rare "three-peat" in sector outperformance versus the S&P 500. After two consecutive years of gains, the firm argues that conditions are aligning for a third, something that has only happened twice in modern history.
The first streak occurred between 1995 and 1997, when deregulation, stable interest rates, and the rise of productivity-boosting technology fueled a powerful rally. Banks re-rated from ~10x P/E to ~15x as interstate branching restrictions fell and GDP growth averaged 6%.
The second came in 2000–2003, when banks rebounded after the dot-com bust, aided by capital markets activity and a flight to quality. Today's backdrop, regulatory recalibration, potential rate cuts, and secular tech themes like AI bear striking similarities, setting the stage for another historic run.
Right now, bank stocks look cheap compared to the broader market. Big banks trade at about 13.6 times expected 2026 earnings, roughly 30% below the S&P 500, while regional banks are even lower at 11 times. BofA expects large banks to grow earnings by 15% next year, and improving economic conditions could push those numbers even higher.
Three factors drive this optimism: Rates, with possible Fed cuts and a steeper yield curve helping margins; Regulations, as Basel Endgame and GSIB surcharge changes free up capital; and Rebounding activity, with M&A and IPO pipelines widening and corporate spending boosting loan growth.
The "MAG 5"- JPMorgan, Morgan Stanley, Goldman Sachs, Wells Fargo, and BNY Mellon lead the pack thanks to strong returns and exposure to wealth and AI. Citigroup also stands out as regulatory headwinds fade.
If history rhymes, 2026 could mark banks' next golden chapter, where discounted valuations meet a friendlier macro backdrop and a tech-driven tailwind.
(Rashika Singh)
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EARLIER ON LIVE MARKETS:
RBC SPREADS HOLIDAY CHEER: OVERWEIGHT TREATS FOR HEALTH CARE & COMM SERVICE CLICK HERE
GROWTH ON TRACK TO OUTPERFORM VALUE FOR A THIRD STRAIGHT YEAR CLICK HERE
FTSE MIB SEEN UP IN 2026, BUT BANKS HIT VALUATION CEILING CLICK HERE
THE UNWINDS TO WORRY ABOUT NEXT YEAR CLICK HERE
EXCITEMENT FREE OPEN CLICK HERE
Banks vs. the S&P https://reut.rs/4aujtDU
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